How it works
A health savings account (HSA) is available if you are covered by an HSA-eligible high-deductible health plan. Money you put in is not taxed, it grows tax-free, and withdrawals for qualified medical costs are tax-free too.
Contributions made through payroll, under your employer’s cafeteria plan, skip federal income tax, most state income taxes and the 7.65% Social Security and Medicare tax. If you contribute on your own, you deduct it on your federal return, which saves income tax but not payroll tax.
The savings shown use your top (marginal) federal bracket, since that is the rate the contribution comes off. The calculator does not apply the IRS limit, which changes each year; check the limit for your year and coverage before you enroll.
Formula
Tax saved = contribution × (federal bracket + state rate + 7.65% if through payroll).
Questions people ask
What are the HSA contribution limits?
For 2027 the IRS limit is $4,500 for self-only coverage and $9,000 for family coverage, up from $4,400 and $8,750 in 2026. People 55 or older can add a $1,000 catch-up contribution. Employer contributions count toward the limit.
Which states tax HSA contributions?
California and New Jersey do not allow the state deduction, so contributions are taxed at the state level there. Most other states follow the federal rules, and states without an income tax have nothing to save.
Is an HSA better than an FSA?
Both use pre-tax money for medical costs, but an HSA balance rolls over every year, stays with you if you change jobs and can be invested. A health FSA is usually use-it-or-lose-it and does not require a high-deductible plan.
Can I contribute to an HSA outside of open enrollment?
Yes. You can change payroll contributions during the year if your employer allows it, and you can contribute on your own until the tax filing deadline of the next year, usually April 15.